KiOR proposes plan of reorganization based on lender equity conversion

By Kali Hays

New York, Dec. 16 – KiOR Inc. filed its Chapter 11 plan of reorganization and related disclosure statement on Dec. 16 with the U.S. Bankruptcy court for the District of Delaware.

According to the disclosure statement, KiOR intends to preserve the business as a going concern, along with its assets and employees with a reorganization of the company’s capital structure through a debt-to-equity conversion.

All of KiOR’s existing equity interests will be cancelled and the company will issue new equity interests upon the effective date of the plan to holders of debtor-in-possession financing claims and first-lien claims in exchange for the cancellation of debt totaling $16 million.

The reorganized company will be funded through an exit facility consisting of a new term loan and a conversion of $15.27 million of the DIP and first-lien claims, which is the amount not being converted to new equity.

However, these transactions are subject to an auction and sale process for substantially all company assets that the court approved on Dec. 8.

As previously reported, the stalking horse bidder for the assets is Vinod Khosla, an affiliate of KiOR’s senior secured lenders and also the company’s DIP lender.

Khosla’s bid is subject to higher and better offers and competing bids must carry a minimum cash purchase price of $17.14 million and are due by 4 p.m. ET on Jan. 7.

If KiOR receives one or more qualified bids, an auction will be held on Jan. 9. Bids at auction must be made in minimum increments of $250,000.

A hearing to approve the sale is set for Jan. 15.

Also upon the effective date of the plan, a liquidating trust will be established for a possible distribution to general unsecured claims.

Plan terms

Treatment of creditors under the proposed plan includes the following:

• Holders of DIP financing and first-lien claims will have a portion of their claims converted into new equity upon the effective date of the plan;

• Holders of secured tax claims will receive quarterly payments, beginning 30 days after a plan effective date, until the claims are paid in full;

• Holders of priority employee claims relating to paid time off policies will receive full payment in cash on the plan effective date;

• Holders of allowed trade claims will receive a cash payment equal to 50% of an allowed claim;

• Holders of convenience claims will receive a cash payment equal to 50% of a claim up to $5,000, or claimants can opt to be treated as general unsecured claims;

• Holders of second- and third-lien claims have no secured collateral and will be considered general unsecured claims and receive a proportionate share of any distribution amount remaining in the liquidating trust;

• Holders of general unsecured claims will receive a proportionate share, if any, from a distribution of the liquidating trust; and

• Holders of subordinated claims will not receive distribution under the plan.

KiOR is a Pasadena, Texas-based development-stage, next-generation renewable fuels company that filed for bankruptcy on Nov. 10. The Chapter 11 case number is 14-12514.

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